Indian Education is a fascinating opportunity. It has scale and an extensive ecosystem of demand. It is badly regulated, but as such things mean in India, which helps the people who are already in and keep others out of it. As the Indian consumers get richer and demand more education, the opportunity in India gets more attractive. This is one of those multi-billion dollar market opportunities, which seem to lay untapped. And, as it is happening in other industries, one could reasonably expect a world-beating company being made by this market. Following the classic model of business growth, it should be possible for a visionary company to take advantage of this relatively protected domestic market and emerge as a player in the global stage.
So far, it has failed to happen. There are some Indian organisations came close, NIIT and Aptech, the two computer training companies, among them. But in a fascinating saga worthy of strategy case studies, they both lost steam just when it seemed they got it within their grasp. How they lost this opportunity may serve as a cautionary tale for those other Indian companies, who are currently taking opportunity of the domestic market to prepare for market leadership globally.
For me, the story is personal. I have been a participant and an observer in the rise and fall of IT Training in India. I have known many of the key players, and have been part of the action on the ground. I have been part of this building up, and watched the unraveling. Indeed, the fact that these companies failed to achieve what they clearly aspired for at one stage - global leadership - make me think back whether what I was involved in building was house of cards anyway.
It pays to be specific in this discussion. While I worked for both NIIT and Aptech during their years of growth, I knew NIIT more closely and for a greater length of time. Besides, NIIT led the domestic market - and became, as rare as it is in India, a truly national company. It had thought leadership, with Dr Sugata Mitra, a TED fellow and an accomplished researcher and inventor, alongwith other very accomplished colleagues, leading its R&D efforts. It had an instantly recognizable brand, footfalls, and even an appeal in the Indian dowry market. It had smart processes and great people, and no dearth of ambition. And, yet, it stagnated and declined - it became an also-ran brand without distinction - in the years since the turn of the millennium. NIIT makes a fascinating study of what could go wrong.
This was indeed an ongoing conversation. In many ways, my own identity is inextricably attached to NIIT, given that I worked for it through a whole decade, and had been associated, as a student, a customer and through friends, for my entire professional life. Why NIIT could not hold onto its leadership position is a conversation - an emotional and engaged conversation in many ways - in many of my meetings.
Consequently, I have had many theories. First, the purely strategic one. That NIIT built a business model solely based on the scarcity of opportunity to study IT within Indian formal education sector, and when the formal education sector started expanding, it failed to innovate much to create other niche offerings, explains a lot of this decline. Second, there is a related one about why niche offerings, like the ones developed by Aptech, never really worked for NIIT - that it was too big for any niche offerings to make sense. Third, the rising Real Estate prices all across India had an adverse effect on NIIT franchising model, which was based on premium real estate, while the ability to command premium prices collapsed in the face of expansion of formal education. Fourth, there are people explanations - that with the expansion of IT services market, NIIT failed to hold onto its best people and failed to recruit them. Finally, my favourite one, which is that NIIT crumbled under the pressure from its stock market listing and continuous pressures for growth, somewhat unsuited to its business model for education. And, indeed, then there are stories, anecdotes and regrets that invariably accompany a story of this personal kind.
However, all these theories need a meta-theory, why this all happened. Why did NIIT fail to innovate? Why did NIIT leadership did not see it coming? Why did it lose its appetite? Why could the franchise model not evolve? Why was stock market listing so disruptive, in the bad sense of the word? To explain all this, I have a Dollar theory, which I think would apply to many Indian companies playing both the domestic and international markets.
NIIT had two large divisions - Software Services and IT Education - and a few other small, niche businesses. As an organisation, it was enthralled by Software Services, what was later spun into a separate company called NIIT Technologies. The division paid the best salaries, and if anyone did well, they were promoted to it from education. It obviously got the mindshare, and its strategies dominated the company strategy. That NIIT went for listing was primarily driven by the need of its Software Services division, and possibly prematurely for its education business. And, indeed, it all made perfect sense - the Software Services were servicing International clients and was earning in Dollars.
Except that the Education business was profitable and market leading. The Software Services business, despite its status inside the company, was an also-ran, pedestrian kind of business, which other people did much better than NIIT. Yet, the company hitched its strategy with the fortunes of this business, ignoring the business where they had clear market leadership and was inching closer to the global leaders such as IBM Global Services. They seemed to have run out of ideas and stagnated, but this is only because they allowed the company to be run by the logic of the dollar and not by the logic of strategy, which are not the same thing.
NIIT could have been Google or Facebook of Education, someone told me once. Well, they did not. Such things do not just happen, and retrospective rationalisation is not the best way to explain things anyway. However, there is a cautionary tale embedded in this, and that is what I wanted to talk about here. The dictum of Jack Welch - that GE needed to get out of all businesses that were either not No 1 or No 2 of their respective businesses - could have served NIIT well. But, being strategic, having a vision and a long term view, could have also helped to make it a more sustainable company and a brand in the world market. Its failure deserved to be studied closely by all those who are starting their businesses with Google-size aspiration in India.
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